If you run a limited company, and your expenses outweigh your income in a given year, you may be able to reduce future Corporation Tax by carrying that loss forward. Here’s how it works.
This guide is intended to provide general insight only — the full rules can be more complex, so it’s always best to get advice tailored to your specific circumstances.
Carrying Forward Losses for Companies
A trading loss occurs when your allowable business expenses exceed your trading income. HMRC allows you to offset those losses in several ways, depending on your situation.
1. Carry the Loss Forward
You can carry forward the loss and use it to reduce future profits, lowering your Corporation Tax bill. Since April 2017, losses can often be used more flexibly — including against non-trading income, provided certain conditions are met.
Example: Your company makes a £10,000 loss in the year to March 2025. In 2026, it earns a £15,000 profit. You carry the loss forward and pay Corporation Tax only on £5,000.
2. Carry the Loss Back
You can carry the loss back one year to reclaim Corporation Tax already paid, so long as your company was trading then. For losses made between April 2020 and March 2022, you may be able to carry back up to three years under temporary COVID relief.
3. Group Relief (if applicable)
If your company is part of a group, losses may be surrendered to other companies in the group, potentially offsetting their profits.
Filing with HMRC
Losses are claimed on the company tax return (CT600). You must specify whether you’re carrying the loss forward, back, or applying group relief. If you’re making a claim outside the normal return, you must write to HMRC.
Is There a Tax Refund?
Yes — but only if you’re carrying the loss back against a year where tax was already paid. Simply carrying forward a loss does not trigger a refund, but it reduces future Corporation Tax.
Final Thoughts
Losses don’t have to be wasted. Whether you’re carrying them forward or claiming a refund, used properly they can help reduce your overall tax burden.
At My Finance Department, we support limited companies by modelling different financial outcomes — so they can decide how best to manage trading losses.
